As many of our readers would be aware, the Australian Competition and Consumer Commission (ACCC) has long been advocating for heavier penalties and a widened scope of the unfair contract provisions of the Australian Consumer Law (ACL) which forms Schedule 2 of the Competition and Consumer Act 2010 (Cth).

This now looks increasingly likely to become a reality with the introduction of the Treasury Laws Amendment (More Competition, Better Prices) Bill 2022 (Bill) to the Australian Parliament on 28 September 2022. Once passed, the amendments sought will significantly increase the risks associated with unfair terms across an expanded range of consumer and business-to-business contracts.

In addition to amending the ACL, the Bill also seeks to amend the Australian Securities and Investment Commission Act 2001 (Cth) applying to relevant standard form contracts that are financial products or relate to the provision of financial services.

Given the significance of the changes and in an apparent effort to allow businesses adequate time to prepare, the proposed amendments would not come into force until 12 months after the Bill receives Royal Assent. This may possibly be in late 2023 or early 2024 depending on progress thru the House of Representatives and Senate.

Briefly, the proposed amendments include:

  • prohibiting the proposal of, use of, application of, or reliance on, unfair contract terms in a standard form consumer or small business contract (currently including unfair contract terms in contracts is not prohibited, however they can be declared void by a Court);
  • changing the thresholds for what constitutes a 'small business contract' where the 'upfront price payable' threshold1 would no longer be relevant to determining whether a standard form contract is made with a small business – instead, the threshold would be based on number of employees (100) or an annual turnover of a business ($10 Million);
  • classifying a contract as a 'standard form contract' despite there being an opportunity for a party to:
  • negotiate minor or insubstantial changes; or
  • select a term from a range of options; or
  • negotiate terms of another contract.

In addition, the court must consider whether a party has used the same or similar contract before;

  • in addition to the current powers (declaring the whole or part of the contract void or void ab initio), the court may make orders to:
  • redress, in whole or in part, loss or damage that has been caused, or
  • to prevent loss or damage that is likely to be caused.

The Court may also make orders on application by ACCC or ASIC to prevent a term that is the same or substantially similar to an unfair term from being included in future standard form small business or consumer contracts (and relief in the form of injunctions restraining this conduct in the future);

  • imposing significant penalties for contraventions with a civil penalty regime for proposing, using, applying or relying on unfair contract terms. In addition, each unfair contract term contained in an affected contract would constitute a separate contravention, as would attempting to rely on the unfair contract term;
  • for a body corporate, the maximum penalty under the ACL would be the greater of:
  • $50 million; three times the value of the benefit of the conduct; or
  • 30% of the body corporate's adjusted turnover during the breach turnover period for the act or omission.

There would also be significant penalties for individuals.

We will monitor progress of the Bill and any amendments made during legislative passage and advise further as the Bill progresses.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.